BIR Ruling No. 010-64

March 9, 1964 BIR RULING NO. 010-64 E. Ramos Construction Sta. Maria, Bulacan Attention : Mr . Fabian de Guzman Supervising Engineer Gentlemen : This is with reference to your letter dated January 17, 1964, requesting for a ruling on the following facts: cdt "We have the honor to request that we be favored with a ruling with regard to the payment of the 3 per cent contractor's tax to our sub-contractor, the Philippine Rock Products, Inc., in connection with our contract with the Bureau of Public Highways for the asphalt paving of Pedro Tuazon Boulevard, Project No. PC62-82-1, Quezon City. "One item of said contract calls for furnishing and placing approximately 915 metric tons of Bitauminous Concrete Surface Course, Item 310, at out unit bid price of P38.90 per metric ton. We sub-contracted the furnishing and processing of materials, hauling and placing but excluding labor for finishing and equipment for compaction to Philippine Rock Products, Inc. at the unit price of P32.00 per tons plus 3 per cent contractor's tax. Inasmuch as our contract is with the Philippine Government represented by the City Engineer of Quezon City, the 3 per cent contractor's tax is automatically deducted from our collections by the said City Engineer. As evidence, we are enclosing herewith photostatic copy of the voucher of payment No. 1726 in which the amount of P1,247.04 was deducted representing the 3 per cent tax on our 3rd partial collection in the amount of P41,567.94. In this accomplishment, 798.66 metric tons of Bituminous Concrete Surface Course was included and therefore the 3 per cent due on said item had been paid by us to the Philippine Government. "However, we wish (sic) to point out that our subcontractor is charging us aside from the P32.00 per ton agreed price on additional 3 per cent tax, representing his tax as sub-contractor in that project. We believe that payment of this tax to our sub-contractor is unfair to us because we shall be paying twice the tax levied on us as a contractor. Since we had paid the required tax as the prime contractor, we believed that our sub-contractor shall be exempted from payment of the said tax and therefore we should not be charged an additional 3 per cent tax." In reply thereto, I have the honor to inform you that, under the aforequoted facts, the Philippine Rock Products, Inc., as subcontractor of the said construction company, is subject to the 3% contractor's tax prescribed by Section 191 of the National Internal Revenue Code. The 3% contractor's tax payable by the sub-contractor is distinct and separate from the aforesaid tax to be paid by the principal contractor arising from the same road building project. (P. J. Kiener, Co., Ltd. vs. Commissioner of Internal Revenue, G.R. No. L-16417, prom. January 31, 1963) aisadc Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue